Correlation Between Citigroup and Nationwide Small

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Can any of the company-specific risk be diversified away by investing in both Citigroup and Nationwide Small at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Citigroup and Nationwide Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Nationwide Small Cap, you can compare the effects of market volatilities on Citigroup and Nationwide Small and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Citigroup with a short position of Nationwide Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Nationwide Small.

Diversification Opportunities for Citigroup and Nationwide Small

0.92
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Citigroup and Nationwide is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Nationwide Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nationwide Small Cap and Citigroup is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Citigroup are associated (or correlated) with Nationwide Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nationwide Small Cap has no effect on the direction of Citigroup i.e., Citigroup and Nationwide Small go up and down completely randomly.

Pair Corralation between Citigroup and Nationwide Small

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.23 times more return on investment than Nationwide Small. However, Citigroup is 1.23 times more volatile than Nationwide Small Cap. It trades about 0.08 of its potential returns per unit of risk. Nationwide Small Cap is currently generating about 0.07 per unit of risk. If you would invest  4,597  in Citigroup on September 11, 2024 and sell it today you would earn a total of  2,589  from holding Citigroup or generate 56.32% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Citigroup  vs.  Nationwide Small Cap

 Performance 
       Timeline  
Citigroup 

Risk-Adjusted Performance

16 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.
Nationwide Small Cap 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Nationwide Small Cap are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Nationwide Small showed solid returns over the last few months and may actually be approaching a breakup point.

Citigroup and Nationwide Small Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Citigroup and Nationwide Small

The main advantage of trading using opposite Citigroup and Nationwide Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Nationwide Small can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Nationwide Small will offset losses from the drop in Nationwide Small's long position.
The idea behind Citigroup and Nationwide Small Cap pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
Check out your portfolio center.
Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.

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